Volume 14, Issue 7- September 2013

Feature

The Comeback Kids
Loewens Return to Their Namesake
by Tara Taffera

When the Loewen family sold Loewen Windows to VKR Holding of Denmark in July 2010, brothers Charles and Clyde Loewen say they were pleased with their decision. Both stayed on for a period of time, with Clyde in an advisory role, and Charles on the board. And both admit they had scaled back. No more waking up in hot sweats with the pressure of the door and window business to run, especially in the midst of a downturn in housing and a depressed economy. Some of their time has been devoted to children and grandchildren and overall a less hectic lifestyle.

So when they heard VKR decided to divest its door and window businesses, which included Loewen (and Gienow Windows and Doors, which has now been sold to Ply-Gem), they found themselves considering a buyback. And soon consideration turned to action, and they closed the deal on July 2.

Charles and Clyde, along with new investors Al Babiuk, president and CEO, members of management and other private investors, make up the new ownership. Charles will assume the role of board chair and Clyde will be rejoining the executive management group.

But this time around it will be a little different. Charles won’t be waking up stressed about the business, those daily pressures will continue to fall squarely on the shoulders of Babiuk.

And although the Loewens are back, Charles is quick to point out: “Now it is definitely not a family business.”

DWM editor Tara Taffera spoke to Charles, Clyde and Babiuk to learn more about the changes. DWM: Tell me a little more about why VKR made this decision.

Babiuk: When VKR acquired Loewen they had just acquired Gienow and their strategy was to expand into the North American market with brands such as doors and windows. They later revisited that strategy to diversify and that meant they had to find alternative ownership for those companies [Gienow and Loewen].

DWM: Al, when we talked to you back in 2010 about the sale to VKR you said the company was looking for a transition plan, so why get back in?

Babiuk: Back in 2010, the Loewen family group consisted of more of the original shareholders who had been in place for a number of years and they were looking for transition as a whole and VKR looked best at the time. Members of the previous group included more family members than just Charles and Clyde, and that sale did allow other shareholders to exit. The current ownership group, including Charles, Clyde, myself and several others, put together a bid as part of a process that VKR was managing. We were one of several alternatives and ultimately we were chosen.

DWM: Charles and Clyde, when you first heard the news that VKR would be selling Loewen what was your first reaction?

Charles: I was on the board at the time and for me it was a modest disappointment because I had thought they were a good steward for Loewen and was pleased when the initial transaction occurred. Loewen is a century-old business that was now in the hands of respectable people with operational disciplines and healthy values that were compatible with ours.

Clyde: My first thought was: Interesting.

DWM: Did you immediately think you wanted to buy back the company?

Charles: Not at all. I had no ambitions to engage in that process.

Clyde: It wasn’t my first thought. We had disengaged from the company in a very agreeable way when we made the initial deal and were getting on with life. But I have lived in Steinbach for the last 27 years so my next thought was with maybe a little more direct interest because I lived here. It really was hypothetical for a while ….

DWM: We’ll get back to your new roles … But first, what had both of you been doing since you left?

Clyde: I had continued on with the company for a few months then I stayed on in a very part-time consulting role until the beginning of this year. I was 50 when I left and considered myself a little young for retirement so I continued my work with charitable foundations, and was really trying to settle in and finish raising my kids and was taking it relatively easy.

Charles: I was 56, and retirement isn’t the right word for my personality type. Yet I was happily relieved of the stresses of leadership that Al has and continues to carry. I had more time for grandbabies, charities and the think tanks that our family has always been involved in. I also had time to finish my honors history degree. So I wasn’t sitting on a fishing boat—or I wasn’t doing it full time at least.

DWM: So are you back full time?

Charles: My position will be board chair, so my daily engagement will be a little more but not intensively more. Al is the company leader and speaks for the company. He will be the one waking up with clenched teeth and a cold shower, as he always has. I hope to be a very interested investor and a strong support to Al and to help him with that accountability factor. I do look forward to a little more intensive engagement with staff, dealers, customers and competitors for whom we have a great respect. My public face will be modest and occasional.

Clyde: I will be back full time in my role as senior vice-president of product. I had been leading the product area since 1990.

Babiuk: Clyde and Charles are being modest. They live and breathe the business and we are thrilled to have them back and active.

DWM: What was the immediate reaction of employees when they heard the Loewen family was coming back as owners?

Clyde: It has been overwhelming and sometimes it is very emotional for them.

Babiuk: Many of our employees are long associated with company and have known many generations of the family so that affinity for the Loewens is very strong, and three years goes very quickly. They have always been ambassadors in the industry so suppliers have had a positive response as well. VKR was a corporate owner so it was a different relationship.

DWM: What can you tell me about the new investors that joined you? What will they bring to the table?

Charles: First let me say that when we left it was a family business and now it is more of an investor/shareholder partnership which includes Al. It is definitely not a family business now. The people bringing capital are also bringing expertise in the industry. We won’t give their names but we have in addition to capital, expertise in corporate finance, business strategy and more. For us it’s a notable change from a family business where the cost of capital is being born—You won the ovarian lottery so to speak. But here everyone is voluntarily bringing in cash. It is a much changed investor climate for the company which is inclusive of he family. We are very optimistic that it isn’t exclusive.

DWM: Do either of you have children who are involved in the business?

Charles: I have three sons, each of whom is very well employed. My children all have an entrepreneurial gene and commitment to the workplaces they are working, along with a sense of boundless ambition. My job is to be their cheerleader no matter where they end up.

Clyde: The short answer is no. But when you grow up in a family business there is almost an implicit pressure, and that was resolved with the sale. I have no expectations that any of my children will enter the business.

DWM: Clyde, since your realm is products what have you seen in terms of trends in the past few years?

Clyde: There are a lot of companies doing a lot of different things. The market keeps moving forward—downturn or not. I was only gone for a few years, and I was still in touch with the industry, but it has been interesting to see what has shifted. The move toward a contemporary architectural design is a strong trend, as well as energy-efficient demands which have driven real product development.

DWM: Back in 2010, you said it had to be the right company to sell to. Do you still think VKR was the right company? You also said your reason back then was to grow in North America. Did that happen?

Babiuk: Everyone has been in participating in the recession during the last four to five years. The industry has been fairly conservative looking for the market to recover which it is now doing. With VKR’s strategy it looked like it would provide an opportunity for growth within our segment of the market. When VKR decided to make this change it meant we needed to look at alternatives. We didn’t know the strategy would change and neither did they. It is important to note that they will continue to own Velux—a major player in North America in the roof window market. When circumstances changed they acted responsibly and went through a thorough the process to see what the best exit was and the best result for the company.

DWM: What advantages did VKR give Loewen that you can now build from?

Babiuk: It was a helpful transition as the move to VKR helped us transition to a disciplined corporate approach. So in those three years we had an externally weighted board structure. We also have processes and best practices that we adopted from them that is now part of our DNA. We had some great opportunities to challenge strategy at the company, and they had a lot of knowledge across the world.

Charles: Over the ten years leading up to the sale I had been striving to engage in the operations of a meritocracy as opposed to a family/nepotistic culture which family business are almost always vulnerable to. In a room full of people when a question is asked employees always end up looking to a family member for an answer. The issues around paternalism and nepotism are mostly eliminated, and that helps to obviate the downsides of family ownership.

DWM: What will be the major changes now that VKR is not involved?

Babiuk: Once VKR refined their strategy and decided they weren’t going to continue expanding in the North American market outside of Velux, we were caught in that so we weren’t able to move forward. We will now make some investments in terms of products and systems. We were working toward helping them exit but now with clarity we can move forward.

DWM: All indicators point to an increase in housing. Are you seeing these positive signs?

Babiuk: We see the housing market improving during the past year and expect it will continue, slowly and at a different pace in each region, not all at the same pace. We are looking forward to focusing on areas such as new product development and continuous improvement in our internal processes to better serve our customers.

DWM: What are the biggest challenges that still remain?

Babiuk: The housing recovery effect across all the different market segments of the door and window market will be tempered by customers' concerns about the pace of jobs growth and sustainability of the economic recovery, so we expect it will take time for housing activity to be fully stabilized.

It is an extremely competitive market and customers want to see value and are comparing products more than ever to make decisions.

DWM: Take me through your strategy for both U.S. and Canada as far as growth moving forward.

Babiuk: Our strategy will continue to be focusing on the architectural and custom builder segment of the market, where the expectation is for quality and customization of a wide range of products.

 

 

 

 


DWM

© Copyright 2013 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.